Selling wholesale is a business model that’s become more popular in recent years. Running a wholesale business allows greater control over how you purchase, modify, and sell products. Are you wondering how to become a wholesaler? Keep reading!
Wholesaling also creates the opportunity to grow relationships with retailers and gain recognition for your brand. Understand how to run a wholesale distribution business to ensure that your business thrives.
Wholesaling is similar to other types of eCommerce businesses in that there’s quite a bit of setup involved. If you aren’t familiar yet with this business model, first, learn the wholesale definition. Second, research how to buy wholesale so you know what's available. Once you’ve mastered basic wholesale principles, it can be both enjoyable and profitable. Let’s look at how to become a wholesaler from the bottom up.
How to Become a Wholesaler: How to Start a Wholesale Business
There are thousands of businesses already operating in the global wholesale marketplace. Despite this fact, in many ways, there’s never been a better time to get started. The range of digital tools available today has made sourcing, producing, marketing, and selling goods a faster process.
Knowing how to start wholesaling requires industry knowledge, a few financial resources, and an excellent B2B marketing plan as you're essentially a B2B business.
Here is how to become a wholesaler:
- Decide on the type of wholesale items to sell. Wholesaling includes everything from electronics and mechanical parts to jewelry materials and food. Wholesale food includes wholesale produce, wholesale meat, wholesale seafood, and wholesale dairy. You can also supplement wholesale sales by selling DTC food. Pick a niche with consistent demand and enough room for profit. You can always expand your product offerings as you grow, but it’s important to start with a reliable product.
- Determine the type of wholesaling you want to do. Some wholesalers are brokers while others are merchants; both types require a specific approach. If you’re a broker, you’ll be selling to other producers. If you’re a merchant, you’ll be selling wholesale goods directly to consumers (see D2C meaning for more info).
- Narrow down your target market. The wholesale industry is already booming; selling to a broad market won’t do you any favors. Take baby clothing for example. While this niche has strong demand, it’s already flooded with sellers. Clothing for infants or upcycled baby clothing, however, could be excellent niches. The idea is to uncover a pain point amid a wider market.
- Identify relevant manufacturers or suppliers. You can discover thousands of suppliers and manufacturers by researching how to find vendors. Look through a wholesale directory or two. Make sure that you’re both getting a good deal and working with a certified vendor. Some companies sell on the black market which isn’t good for you or your customers.
- Complete relevant paperwork. As is the case with any business, the government requires certain forms to be filled out. The documents often include an eCommerce business license, employer identification number (EIN), sales tax ID, and potentially a reseller's permit. You'll also need to research how to get a wholesale license and apply for it. If any legal issues crop up, you can prove at a moment’s notice that your work is honest, including by way of a wholesale purchase agreement contract PDF.
- Develop a strong wholesale sales and marketing plan. Once the housekeeping is complete, you need a strategy to get your brand recognized. A great way to accomplish this is by matching your wholesale marketing efforts to your budget. For example, a business just starting out probably shouldn’t spend thousands of dollars on advertising or eCommerce PPC. A better approach would be low-cost DTC marketing like eCommerce SEO, referrals, and word-of-mouth.
- Organize your retail efforts. Many wholesalers sell their products in retail stores, which offers visibility and traction. As a new wholesaler, you’ll want to have appealing offers in place to increase their likelihood of working with you. Research stores that are accepting new vendors and match your target audience’s pain points.
- Open or rent a physical workspace if you need it. Some wholesale companies use dropshipping, which is shipping goods direct to consumer (DTC) without holding your own inventory. Other wholesalers use materials to create new products which are then sold to customers. Your needs will depend on the business model you’ve chosen. Familiarizing yourself with warehousing is a boon for wholesaling. Make sure to invest in quality eCommerce packaging and an eCommerce shipping team that can get the job done.
The approach you take for your wholesale business depends on the customers you want to reach. If you’re brokering products, the sales relationships you create will be different from those of a merchant.
Let’s look at how to sell wholesale goods.
Key Takeaway: Are you looking into how to become a wholesaler? The first step is to determine a wholesale product to sell. Then create a business plan and get your business up and running.
How to Become a Wholesale Vendor
There are multiple ways to become a wholesale vendor, but everyone who does so follows a similar path. Here are the essentials on how to become a wholesaler and more specifically, a wholesale vendor:
- Research the products you want to sell. Since there are so many products to choose from, it’s important to settle on what you’re selling. Many eCommerce experts (see what is e commerce) recommend starting in one product niche and expanding as your business grows. Otherwise, you’re competing with dozens of successful brands, each of which is reaching existing customers.
- Start developing relationships. It’s challenging breaking into the already vast market of wholesale distributors (like wholesale alcohol distributors), vendors, retail outlets, and customers. This is why it’s smart to start early. Every retailer is interested in profit, so if you can demonstrate why your products are conducive to this end, they’ll be happy to work with you.
- Figure out your pricing model. Wholesaling is appealing because you have more flexibility with profit margins. You can sell goods in smaller quantities to consumers, manufacture your own products, or sell in larger quantities to retailers. You may use your wholesale business as the foundation to sell custom subscription boxes in the future, like a meat subscription box or a produce subscription box. That said, you want to sell at the sweet spot for your product and audience. Research what similar vendors are selling their products at, and price your goods accordingly.
- Look for your target audience. Whether you’re selling to retailers or consumers, there’s a market you can succeed in. Knowing where your competitors are failing can give you an advantage, especially as a new wholesaler. You can uncover this information by reading product reviews, participating in forums, and creating a buyer persona.
- Finish the required paperwork. It’s not the fun part, but business documents are necessary to be a wholesaler. Laws and regulations tend to differ based on geographic location, so make sure to do your own research before starting.
- Set a minimum order quantity (MOQ). When you start gaining traction with retailers, many will want to know what your MOQ is. The idea behind this principle is to keep yourself profitable while retaining great relationships with clients. A great MOQ will be high enough to generate momentum for you, and low enough to prompt frequent ordering from retailers.
- Offer competitive deals. Retailers are accustomed to numerous vendors vying for their attention. If you want to stand out, it’s going to take more than a quality product. Retailers have budgets too, so you don’t want to make unreasonable requests. Incentivize their business with you by offering bulk order discounts and flash sales.
Vendor Vs. Supplier
It’s useful to note that wholesale vendors and wholesale suppliers are not the same. A wholesale vendor is someone who buys wholesale goods in bulk, like produce wholesale, and resells them to businesses or consumers.
A wholesale supplier is someone who sells raw goods or materials to businesses in bulk. By nature of their work, suppliers only sell to other companies, because suppliers generally don’t create retail networks for their products. Let’s examine how to become a wholesale supplier:
- Determine the goods you want to sell. Picking products you can stand behind will give you a leg up as a supplier. If you’re selling something just to make a profit, prospects will see through this and be less likely to work with you. It’s better to go all in on a niche and become reliable this way.
- Decide if you’ll be selling raw materials or manufactured goods. As a supplier, you’re in a unique position. You can sell materials that will become part of a manufacturing inventory, or sell to brokers who work with retailers. Selling to manufacturers often means you can sell greater quantities to fewer clients. Offering your goods to brokers allows you to get your products in more markets faster.
- Run a healthy budget. Wholesaling is inexpensive to start, but that doesn’t mean you should throw caution to the wind. Research what it will cost to maintain your raw materials inventory first, and don’t forget to include labor and indirect costs. Take the time to test your business model and wholesale price point before you expand your catalog.
- Build relationships with wholesalers and distributors. Having an excellent product is half the battle; getting into the hands of the right people is the other half. The sooner you strike up mutual relationships with partners, the better. Remember that everyone is interested in how your goods can benefit them. If you can identify a need of theirs that you can solve, you’ll be thriving before you know it.
- Focus on value. Retailers and distributors know that wholesale products vary greatly in quality. Low-cost goods may be easy to profit on, but that doesn’t mean retailers will stock your products. Your goods should offer specific functional and market value that differentiates them from other products. Carving out your niche early on in the supply chain means your goods will stand out when customers are shopping.
Frequently Asked Questions About How to Become a Wholesaler
Becoming a wholesaler is a serious undertaking that requires planning, financial resources, and strong marketing skills. If you’re ready to learn more, check out the commonly asked questions below:
Is wholesale business profitable?
Wholesaling can be profitable if you have a strong wholesale marketing plan, high demand products, and an audience that’s ready to buy. You also need strong relationships with retailers and distributors so you can get noticed among the thousands of wholesalers that already exist.
One of the biggest challenges with wholesaling is maintaining profitable MOQs and average order quantities (AOQ). An MOQ is the minimum amount a buyer must purchase for you to justify a production run, and an AOQ is the average order amount across your customers.
Building your buyer network, offering discounts and purchase incentives, and handling orders quickly are also part of wholesaling. As long as you know what sales numbers to hit to be profitable and you’re always driving value with your buyers, you can have a successful wholesale business.
Can you sell wholesale as your own?
Yes. As long as you have a wholesale license and a retail license, you can purchase wholesale goods and sell them to consumers. This business model is different from wholesalers who sell to distributors or retailers.
In order to remain profitable as a direct to consumer wholesaler, you need to add a significant profit margin. Most wholesale products have 30-50% markup for consumers, though this percentage depends on the marketable price for similar goods. Most consumers will only buy from wholesalers if the product price is cheaper, the value is greater, or both.
Is selling wholesale worth it?
Knowing whether or not a wholesale business is worth it depends on your sales and marketing approach and how much you care about the wholesaling industry. Due to how competitive wholesaling has become and the ease of buying products online, your wholesale business must stand out to be successful.
Selling wholesale can be worth it if you have reliable suppliers, a strong customer base, and excellent products. It takes time to accumulate these, though, so start with the budget you have and continue building your business relationships each day.
To Wholesale, and Beyond!
Now that you know how to become a wholesaler, the sky's the limit. Be patient and diligent as you develop relationships with retailers, deliver value to your customers, and perfect your eCommerce sales process. As your sales increase, your fill rate will go up, which leads to more happy customers.
Keep looking at your B2B (see B2B meaning) or B2C supply chain for ways to consolidate, and remember to make high-value products a priority. Continue reading more about wholesaling in our wholesale management guide.